Smart, sustainable and affordable housing as a tool for local authorities to face multiple challenges

Smart, sustainable and affordable housing as a tool for local authorities to face multiple challenges / Andres Jaadla, Member of the Committee of Regions

2024.gada 20.septembris

1. Hadrien MICHEL
European Commission – DG ENER.B2
Financing the energy renovation of buildings

Jurmala, Latvia
20 September 2024

2. The Energy Efficiency Financing Challenge
Energy EfficiencyInvestmentsNeeds
Total investments
(2021-2030)
Eur3.000 billion
(Source: Primes REPowerEU
Plan)
InvestmentGap
(2021-2030)
Eur1.650 billion
(Source: IA EED,IA CTP)
Energy efficiency and climate targets
•Energy Efficiency objectives – EED
review
•Buildings objectives- EPBD review +
Renovation Wave
•REPowerEU Objectives
Closing the Investment Gap
Eur 165
billion
per year
More EU
Funds, and a
more efficient
use
More MS
Funds, and a
more efficient
use
More private
Financing
Energy Efficiency faces one of the largest investments gaps. This represents an
unprecedented challenge.

3. Energy Efficiency Financing
Leveraging private financing and investmentsis conditional to achieve the
Union’s climate and energy targets.
Drivers:
•Public Funds as a catalyst for private investments (grants models are insufficient).
•Combination of grants, financial instruments and technical assistance
•Development of financing schemes at scale/innovative/performance based (On -tax and On-
bills, energy performance contracting, pay-for-performance, pay-as-you-save, etc).
•Project development assistance (e.g. replicating ELENA model) and technical assistance
(ELENA, LIFE PDA), support to One-Stop-Shops for integrated home renovation
•Stimulate demand, including removing up-front costs, with measures that can be sustained
over time.
•Development of energy efficiency lending products (EEM, Green Loans, etc).
•Strengthen the cooperation with financial institutions (EEFIG Coalition)
•De-risking investments
Public
Funding (EU
and National
Funds)–
10%-20%
Private
Financing
80% -90%
Achieving the
2030 Energy
and Climate
targets →
3.000 billion €
by 2030

4. 1. EU funding instruments for the
energy performance of buildings
•Cohesionpolicyfunds
•Recoveryand resiliencefacility
•ELENA Technicalassistance
•LIFE Clean Energy Transition
•European Energy EfficiencyFund (EEEF)

5. •Cohesion policy funds
•866,6M€ to finance energy-related investments
•304M€ for energy efficiency (specific objective EE + relevant features
from the Just transition fund)
•Recovery and resilience facility
• 482,5M€ to finance energy-related investments – 25% of total RRP
funding
•267,7M€ for energy efficiency categories
•Main challenges:
•Form of support (grants vs financial instruments) -> leverage
•Sustainability and replicability
Cohesion and RRF as main EU funding instruments

6. LIFE CET –support to implementingthe energy
transition
▪Break market barriers,
change market and
regulatory fundamentals
▪Improve governance and
capacities/skills at all
levels
▪Mobilise investment and
improve access to finance
▪Citizens at the centre of
the energy transition
Life Clean Energy Transition Programme

7. LIFE CET funding areas - example of outcome Call2023*

8. Amongthe most
successfulEU TA facilities
15 yearsof experience(started
in 2009)
165 projectsfinancedin 25
MemberStates
32 leveragefactor on average:
>€9,5bn investmentstriggered
witha €300M budget
NowmanagedunderInvestEU
Advisory
Latvianprojects
GIEEP– With a budget of € 950.000, the programme resulted in EE
and RES investments of over EUR 28 million in 65 facilities owned by
SMEs and MidCap enterprises in Latvia, resulting in annual energy
savings of 85.65 GWh, annual renewable energy generation of 21.98
GWh and avoided emissions of 16 659 tCO2eq.
JELGAVA –Retrofitting multi-family residences in the city of Jelgava by
pro-actively involving the owners and applying standardises energy
efficiency packages that bring down the overall cost. The housing
management company JNIP carried-out large-scale EE renovations in
50-60 of its 400 buildings.
New projectsENERGOGRANTS (ALTUM),
RENOVATES (Riga Energy Agency)
ELENA

9. THE EUROPEANENERGYEFFICIENCYFUND
9
•The EU instrument to advance sustainable energy in local communities
A strategic instrument of the European Union
•The eeef’s mission builds on the European strategy for CO
2e

emission reduction and the comprehensive framework of
legislation and policies on the subject (e.g. EU Energy
Efficiency Plan, Mar-2011 referencing to the eeef)
Greenhouse gas reduction comes with financial returns
•The ultimate aim is to foster energy efficiency and an
intelligent use of energy as a resource in local
communities, to enable projects which are not only
environmentally friendly, but also financially sound.
Projects target the public interest in the EU Member States
•The Fund invests in clean and efficient energy projects in
Europe along private partners supporting the public sector
and/or public entities directly or local financial players.
Impacts are monitored
•CO
2e
emissions
and primary energy savings are tracked
periodically and monitored in line with international
protocols.
Aligned with the European Union Green Deal
•The eeef is working towards the 2050 climate-neutral
objectives in the European Green Deal. The fund focuses
on multiple key policy areas such as clean energy,
sustainable mobility and building renovations to support the
sustainable green transition.

10. EEEF projectsin LATVIA

11. 2. Tools to support the mobilization of
private financing
•EPB Directive
•EE Directive
•Financing Coalition
•National ELENAs

12. •Agreement on:
•objective: reach climate neutrality by 2050
•Importance of buildings stock
•Co-benefits of renovations…
•But agreement also on:
•Challenge of upfront cost
•Not the only barrier by far, but still a hurdle
•And a tangible and visible one, also in public discourse
Starting point: financing as one of the barriers to renovations
“When you can measure what you are speaking about,
and express it in numbers, you know something about it;
but when you cannot measure it, when you cannot express
it in numbers, your knowledge is of a meagre and
unsatisfactory kind” (Lord Kelvin)

13. •Member States to make best use of available resources at national and EU level (Art. 17(5))
•Address barriers to renovations:
•lack of liquidity & solvency, linked to upfront costs (Art. 17(3))
•lack of information (Art. 17(8))
•split incentives (Art. 9(4)), 17(19))
•administrative & legal barriers and hassle (Art. 17(2)(5))
•Promote complementary financing instruments (Art. 17(7))
•Adapt the approach to:
•recipients: priority: vulnerable households (Art. 9(4), 17(4)(18)), including tenants (Art.
17(17)(19))
•buildings: priority: (very) worst-performing buildings (Art. 9(2)(4))
•types of renovations: priority: deep(er) renovations (Art. 17(16))
•And link financing to targeted or achieved energy savings (Art. 17(14), requirement from 2018
revision)
•Adopt system perspective, beyond financing of works themselves, to also include financing of
toolbox (information & technical support – Art. 9(4), 12(2), 17(16), 19(4), Annex II) & skills (Art.
EPBD - Article 17 Financial incentives, skills and market barriers

14. •New article, as part of the enabling framework
•Obligation to set-up and run technical assistance facilities
•Transposition deadline: May 2026
•Anchor it in the regulatory framework, through the National Building
Renovation Plans
•Ones-stop-shops to target all actors involved in building renovation
•Flexibility on model and respective services and target groups
•What matters is accessibility to the actors and to the services
EPBD – Article 18 One-stop shops

15. Energy Efficiency Directive(EU) 2023/1791
•UpdatedEU energyefficiencytargetsto 11.7% reductionin primaryand final
energyconsumption: indicativePEC targetof 992.5 Mtoe, bindingFEC targetof
763 Mtoe
•Streghtenannualnational energy savingobligationsto 1,49% in averagewith
step-wiseapproachand exclusionof savingsfrom directfossilfuelscombustion.
Includinga Just transitionsub-target
•Reinforcement of the Energy Efficiency First Principleaccrosssectors
•Update the definitionof energy efficientdistrictheatingand cooling, introducing
the 2050 trajectoryfor efficientdistrictheatingand coolingsystem, and
introduce localheatingand coolingplans for municipalities(over 45.000).
•Update thresholds for energy audits (10TJ/year)and energy management
system requirements (85TJ/year)for enterprises
•Increasethe exemplaryrolefromthe publicsector: annual reductionof 1.9% of
publicsectorenergyconsumptions,increasethe annual renovationratesto 3% of
the publicbuildingsover250 m2.
•Reinforcesprovisionson financingto leveragefurtherprivate capitals
•Introducingmeasuresto alleviateenergypovertyand boost consumer
empowerment
11.7%
Decrease
in energy
consumption
Stepwise increase
in annual cumulative
energy savings
obligation in end use:
1.3% as of 2024
1.5% as of 2026
1.9% as of 2028

16. Article 30: Financing energy efficiency
➢Facilitate the establishment of financing
facilities, increase access to finance, and
project development assistance to
mobilise investments in energy
efficiency in different sectors
➢Strengthen cooperation and dialogue
with private and public financial
institutions to mobilise private
investments in energy efficiency
measures and energy renovations
➢Promote energy efficiency lending
products (EE mortgages & green loans)
by ensuring a wide and non-
driscriminatory offer, and facilitate the
implementation of on-bill and on-tax
financing schemes
➢Introduce reporting
requirements on energy
efficiency financing
(volume, leverage factor,
lending products)
Regulate the voluntary National
Energy Efficiency Fund set up by
Member States

17. ➢ (1) Intro/general provision requiring Member States to facilitate the establishment/scale-up of financing
facilities for energy efficiency, to maximise the benefits of multiple streams of financing
➢ (2) General provision requiring Commission to assist MS in setting up such facilities, and in particular
project development assistance facilities at national and regional level with aim of increasing investments
and support EE measures in vulnerable groups […]
Key-elements: Blending multiple stream of financing, maximise benefits of TA facilities (ELENA-model) with
COM/EIB ready to support, introduce focus on financing EE measures in vulnerable groups
Creation of National ELENAs with support from the EIB and the
Commission
Article 30 (1), (2) – financing and TA facilities

18. EED - National Energy Efficiency Fund
➢(11) Member States may set up National energy efficiency fund (NEEF) to finance energy efficiency to
support MS to achieve their national contribution to the EU target under Article 4 EED (and energy saving
obligations under Article 8 EED). NEEF may be established as a dedicated fund within existing facilities.
➢(12) Where MS establish NEEF, they shall establish financing instruments, including public guarantees, to
increase the uptake of private investments, energy efficiency lending products, and innovative financing.
The NEEF should support as a priority energy efficiency measures among people affected by energy
poverty, vulnerable customers, […] pursuant to Article 8 EED. Support from NEEF should include financing
for energy efficiency measures in SMEs.
➢(13), (14) Options to fulfil obligations under Article 8 EED and Article 6 EED by mean of a financial
contribution to NEEF. (N.B: If this option is pursued, Annex V on accounting of energy savings for the
purpose of Article 8 EED should apply to investment supported under NEEF for the financial contribution).
➢(15) MS may use the revenues from annual emission allocations under the ETS for the
development/deployment of innovative financing for energy efficiency.

19. Overarching objective: Mobilise private financing for energy efficiency at scale
Model: Triangular cooperation between Commission – Financial Institutions – Member States
European Energy Efficiency Financing Coalition
Three layers approach
1
st
Layer: Political Mandate and
Project Objectives
2
nd
Layer: Technical Expertise
3
rd
Layer: Presence in national
markets with a specific work plan
Support by a Secretariat
19

20. Launch Event of the Coalition – April 2024
20
•Event hosted by Commissioner Simson, with the presence of Philippe Henry, Vice-President of the
Government of Wallonia (BE Presidency) and Thomas Östros, Vice-President of the EIB.
•Two different panels to reiterate the importance of mobilising private investment and market uptake
for energy efficiency.
•Recognition of the importance to find solutions to trigger private investment
•Need to shift from funding through subsidies to blended
financing solutions (e.g. guarantees)
•Potential tasks for the Coalition
•Consolidate links to sustainable finance framework
•How to link the NECPs and the long-term renovation
strategies with private investment
•Need to work with demand
•Find and mainstream best practises

21. Next Steps
21
•Launch the first call for membership for Financial Institutions
•Establishment of the Secretariat
•Publication of the tender in progress
•Work with Member States on the national hubs
•Identification of the national entities involved with the
work of the national hubs.
•Definition of the Work Programme of the Initiative
•Structure fully functional by end 2024.

22. Thank you
Hadrien Michel, Energy efficiencyunit, ENER.B2